Introduction
Truong Hai Auto Corporation (THACO) was founded on 29/04/1997 by Tran Ba Duong majoring in Mechanical and Automotive THACO also invests in Agriculture, Construction investment, Logistics, and Trade & Service.
THACO is Vietnam's largest and leading automobile manufacturer, encompassing a comprehensive value chain that includes research and development, spare parts production, assembly, transportation, distribution, and retail The company offers a diverse range of vehicles, including trucks, buses, passenger cars, and special-use vehicles, catering to both mid-range and high-end markets For many years, THACO has consistently maintained a leading position in sales and market share within the Vietnamese automotive industry.
- With Agriculture investment, THACO has established the THADI company which operates in the agricultural sector with 5 main businesses: fruit trees, cereals, forestry, livestock, and agricultural materials.
- With Construction investment, THACO invests in the construction of traffic works in the PPP form and socialization, construction of industrial zones, investment in new urban development, and complex projects.
THACO offers comprehensive logistics services, including port services, shipping, trucking, and warehousing, to meet the needs of businesses in the Chu Lai New Urban Area and the Central Region - Central Highlands.
THACO is actively engaged in the Trade and Services sector, offering a diverse range of businesses including a wedding convention center, supermarket, food services, and entertainment options Additionally, THACO provides essential services such as car rentals, security, cleaning, maid services, and tree care, catering to various customer needs.
- THACO implements the business philosophy of creating value for customers and society, creating conditions for human resources to develop in line with the group’s unlimited development strategy.
- As a leading enterprise in the field of manufacturing, assembling, and distributing cars in Vietnam, THACO has determined that its target is to
To strengthen its market presence in the ASEAN region, the company aims to enhance international collaboration to select appropriate technologies and boost localization rates This strategy will facilitate integration into the global value chain and lay the groundwork for evolving into a multidisciplinary industrial corporation By improving competitiveness, the company aspires to position its products among the top in the area.
THACO’s goal is to become a multidisciplinary industrial group of Vietnam with ASEAN regional stature, in which automobile production and businesses are the keys.
- Vehicle sales growth has slowed down in the 2017 - present period.
- The State has introduced many policies to support the automobile industry but has not yet obtained outstanding results.
- Infrastructure does not meet the demand for cars The low localization rate leads to high prices.
- Vietnam benefits very little in the supply and production chains of regional automakers Oversupply.
- It is forecasted that the car supply in 2020 will continue to be abundant.
- Fierce competition from imported cars.
- The demand for assembled cars declined significantly.
● Long-term (>5 years): LOOKING POSITIVE
- The stable macro environment supports growth in car demand.
- A potential market with a large population and a low vehicle-to-population ratio.
- The trend of moving car production from the Americas and Europe to Asia.
- Participate more deeply in the automotive supply chain in ASEAN and Asia.
3 download by : skknchat@gmail.com
- Government determination in the development of the automobile industry.
Internal Environment Analysis
The Board of Director executes the right to administrate the company through regular meetings of the permanent members, in form of written Resolutions.
The Board of Director provides direct supervisions to theManaging
Directors, including but not limited to the following activities:
- Executing the plans and targets set by the General Meeting of Shareholders and the Board of Director.
- Executing the Resolutions issued by the General Meeting of Shareholders and the Board of Directors – in terms of progresses and methods.
- Actively and frequently evaluate the execution of business strategies and economic statistics and provide feedback and directions where necessary.
- Monitoring the implementation of corporate laws, company policies and other regulations.
The Board of Director of THACO is not divided into subcommittees, however, each member are assigned to specific fields of operations, including:
- One member representing the capital contribution of the family.
- One member in charge of the foreign relationships and business in foreign countries.
- One member in charge of the agriculture field, representing the capital contribution of the company at HAGL Agrico.
- Two members in charge of finance and risk management.
- One member in charge of accounting activities.
- One member in charge of training and development.
4 download by : skknchat@gmail.com
- Three members in charge of supervising the main businesses of the company.
- Mr.Trần Bá Dương: Chairman of the Board.
- Mr Nguyễn Hùng Minh: Vice Chairman of the board
- Mr Phạm Văn Tài: CEO of THACO.
- Mr Cheah Kim Teck: CEO of JC&C
- Mr Stephen Patrick Gore: CFO ofJC&C
- Mr Lee Yong Bum: Head of FDI Investment department at Techcombank
- Mr Đỗ Xuân Diện: Chairman of the Board of THADI.
2 Position Assessment: Using BCG’s Matrix
- Stars: Products in high growth market with high market share:
THACO is a leading automobile manufacturer and distributor in Vietnam, holding a significant 34.1% market share as of February 2020 The company achieved remarkable sales, with a total of 5,684 vehicles sold, reflecting a 12% increase from the previous year.
5 download by : skknchat@gmail.com
- Question marks: Products in high growth markets with low market share.
THACO has ventured into the agriculture sector by acquiring a 35% stake in Hoang Anh Gia Lai Agrico (HNG) Subsequently, the Group launched THADI Corporation, which focuses on the production, processing, and trading of fruit trees, cereals, livestock, forestry, and agricultural materials.
Both companies were not listed among the biggest agriculture companies in Vietnam, although the agriculture field is developing fast.
- Dogs: Products with low growth or market share.
THACO's commerce sector enhances its core production and business areas by developing integrated business complexes These complexes feature commercial centers, convention centers, offices, hotels, supermarkets, food courts, entertainment venues, and cinemas, all built through collaborations with experienced and skilled partners.
6 download by : skknchat@gmail.com
Commerce is not a fast-developing field and THACO’s new ideas are yet to be in the position to compete with other commerce corporations in Vietnam.
- Cash cows: Products in low growth markets with high market share THACO does not have any product in this type.
THACO is currently the biggest and fastest growing automobile corporation inVietnamese’s market.
Financial Analysis
This section focuses on the financial operations of Thaco, following an analysis of its internal structure We will conduct a comprehensive financial analysis of the company over the past three years, ensuring that our findings align with Thaco's financial objectives.
1.1 Ratio analysis-Time series and Peer analysis 1.1.1: Liquidity Analysis:
- To analyze the ability to pay their debts, the liquidity analysis is an effective tool Liquidity analysis consists of the cash ratio, quick ratio and current ratio.
The cash ratio measures an organization's ability to cover its current liabilities with readily available assets, specifically cash This financial metric is calculated by dividing the total cash and cash equivalents by the current liabilities, providing insight into the company's liquidity.
The quick ratio, also known as the acid test ratio, evaluates a company's ability to meet its current liabilities through the liquidation of short-term assets, thus reflecting its financial position This ratio is calculated by dividing current assets, excluding inventories, by current liabilities.
7 download by : skknchat@gmail.com
- Lastly, the current ratio, which compares the current assets with the current liabilities of an organization.
In 2019, Thaco's cash ratio was nearly double that of 2017 and 2018, indicating an improved ability to meet liabilities with cash However, the quick ratio in 2019 saw a 30% decline compared to 2018, attributed to a 10% increase in current assets, amounting to 54,689,802 million dong.
2019 vs 49668342 million dong in 2018), the increase in the number of inventories from
From 2018 to 2019, the company's financial growth accelerated, with a 24.48% increase in revenue, rising from 27,933,055 million dong in 2018 to 34,770,542 million dong in 2019 However, current liabilities surged to 53,520,207 million dong, reflecting a 31.23% increase compared to 40,781,960 million dong in 2018 This rapid rise in current liabilities and inventories outpaced the growth of current assets, impairing the company's liquidity and ability to meet its debt obligations Although there was a slight improvement in the current ratio from 2017 to 2018, it significantly declined in 2019 due to the disproportionate increase in current liabilities The company's 30% rise in current liabilities was primarily driven by a strategic focus on enhancing financial leverage through debt funding to support the establishment of new car manufacturing facilities and partnerships with international car brands Overall, this situation indicates a challenge in the company's ability to efficiently convert assets into cash to settle debts.
8 download by : skknchat@gmail.com cash to pay off their liabilities worsened somewhat, the current assets of the company are high enough to cover the debts.
Efficiency analysis evaluates a business's effectiveness in utilizing capital, assets, and resources to generate profit and revenue annually Thaco primarily operates in automobile manufacturing and parts but also invests in real estate, services, and agricultural products To conduct this analysis, we combine revenues, expenses, and cost of goods sold from all industries using data from joint financial statements The efficiency analysis encompasses four key categories: inventory turnover ratio, accounts receivable turnover ratio, asset turnover ratio, and accounts payable turnover ratio.
The inventory turnover ratio is calculated by dividing the cost of goods sold by the average inventory over a year, indicating how frequently a business sells its entire stock within a specific timeframe.
The accounts receivable turnover ratio is calculated by dividing net credit sales—total sales minus sales returns and allowances—by the average accounts receivable, which is determined by averaging the starting and ending accounts receivable over a specific period, typically quarterly or annually This ratio assesses the efficiency of a company's revenue collection and indicates how often the firm collects its receivables within a given timeframe, primarily on an annual basis.
- Asset turnover is measured by dividing the organization’s net sales with its average total assets (sum of ending and beginning total assets divided by
2) This ratio demonstrates how efficient the firm uses its total assets to produce revenue.
- Accounts payable turnover ratio is calculated by dividing the net credit purchases (cost of goods sold + ending inventory –
The average accounts payable ratio indicates how often a company settles its debts within a specific accounting period, calculated by dividing the sum of starting and ending accounts payable by two A higher ratio signifies that the firm can retain its cash for a longer duration, reflecting effective cash management and creditor payment practices.
Year Inventory Accounts Assets turnover Accounts turnover receivable payable turnover turnover
Between 2017 and 2018, Thaco experienced a notable increase in inventory turnover; however, the ratio reverted to 2017 levels in 2019 due to revenue losses The accounts receivable turnover saw a significant decline of 12.5% from 2017 to 2018 and a further 19.4% drop from 2018 to 2019, indicating a decreased efficiency in collecting receivables While asset turnover remained stable in 2017 and 2018, it faced a sharp decline in 2019, attributed to reduced sales and revenue despite an increase in total assets.
10 download by : skknchat@gmail.com
The accounts payable turnover ratio for Thaco significantly declined from 5.61% in 2017 to 2.95% in 2019, indicating that the company was taking longer to settle its debts This situation arose from an increased reliance on debt financing, which hindered Thaco's ability to generate substantial profits The overall efficiency of the firm's financing operations deteriorated, exacerbated by declining automobile sales and a rising number of liabilities in 2019 Additionally, Thaco, along with the broader automobile industry, faced intensified competition following the removal of taxes on domestically produced and ASEAN-manufactured vehicles.
The leverage analysis of this company examines the effectiveness of its capital structure, highlighting the importance of the leverage ratio category This analysis reveals how companies utilize a combination of equity and debt to fund their operations, making it crucial to understand the amount of debt a company holds Evaluating this debt is essential for assessing the company's ability to meet its financial obligations as they arise The leverage analysis includes two key metrics: the debt ratio and the interest coverage ratio.
The debt ratio is comprised of two key metrics: the debt to total assets ratio and the debt to total equity ratio, which assess the extent of debt relative to a company's assets and equity A higher debt ratio indicates a more aggressive approach to leveraging debt However, if a company fails to manage its liabilities effectively and cannot generate sufficient revenue to cover them, it risks facing bankruptcy.
The interest coverage ratio, calculated by dividing earnings before interest and taxes (EBIT) by annual interest expenses, indicates how effectively a company can meet its interest obligations A ratio of 1.5 or lower raises concerns about the company's ability to cover interest payments, while a higher ratio reflects stronger financial health and better capacity to manage interest expenses.
11 download by : skknchat@gmail.com
Year Debt to Total Assets Debt to Total Equity Interest Coverage
Thaco has primarily relied on debt rather than equity in its capital structure, indicating it is a debt-structured firm This trend is largely due to the company's efforts in localizing international car brands like Mazda, Peugeot, and Kia, as well as constructing manufacturing facilities, notably the complex in Chu Lai Recently, the firm's interest coverage ratio (ICR) has shown a downward trend, dropping to 4.72 times, attributed to a decline in automobile sales revenue However, Thaco's substantial total assets provide a buffer, ensuring the company can meet its interest payment obligations.
Recommendation…….………………… ……………… ………… 28 V References
At the 7th Party Congress, Thaco unveiled its strategy for the 2020-2025 term, aiming to evolve into a multidisciplinary industrial corporation The primary focus will be on the automotive and mechanical sectors, while agriculture and construction investments will serve as key areas of development Additionally, logistics and trade will play supportive roles in this comprehensive growth strategy.
During the recent congress, it was reported that the Thaco Party Committee has effectively implemented a variety of innovative and practical approaches to promote patriotic emulation movements alongside business production initiatives This has led to a significant shift in the awareness and development of the values and lifestyles of Party members and workers.
- Through emulation movement activities, many good examples, innovative projects and technical improvements, 450 topics have been implemented, benefiting businesses more than 100 billion VND.
During the Congress, Mr Le Tuan Anh, Secretary of the Party Committee of Dong Nai Province's Business Sector, urged Thaco's Party Committee to actively implement the Resolution from the 5th Conference of the Party Central Committee (Session XII) aimed at enhancing the private economy as a key driver of the socialist-oriented market economy He emphasized the importance of aligning the company's development strategy with the annual resolutions of the Party Committee and establishing a regulatory framework for effective coordination between the Party Committee and the Board.
Directors and the Board of Directors of the company to create conditions for party organizations to participate in building and developing enterprises.
- Moreover, on March 24, 2019, at Groundbreaking ceremony in Chu Lai, Prime Minister Nguyen Xuan Phuc would like to present the 6 main points drawn from Chu Lai Thaco:
The most valuable resource of Chu Lai and Vietnam lies not in its land or sea, but in the mindset and determination of its Party and Government, along with the collective ambition for progress and development.
Since the beginning of the current term, the Government and the Prime Minister have actively engaged with the business community and investors, fostering a spirit of entrepreneurship and nationalism within each enterprise.
To achieve success, the province must revitalize its key stakeholders—dynamic and determined investors who possess financial strength, a nationalistic spirit, visionary outlook, open-mindedness, governance expertise, and business acumen.
Engaging investors is just the beginning of a lengthy journey; provincial leaders must actively support them By viewing the reputation of enterprises as their own, local officials can address challenges collaboratively, treating the obstacles faced by businesses as their own Each success achieved by these enterprises should be recognized as a collective victory for the community, fostering a strong partnership between localities and investors.
To foster a collaborative environment, the business community and investors must adopt a unified mindset centered around the 3-win formula, which emphasizes mutual benefits for the Party, the Government, local businesses, and the community This approach ensures that all strategic decisions and development models prioritize the interconnected principles of economy, society, and environment.
To foster a brighter future, it is essential to continually nurture our aspirations and view past achievements as stepping stones rather than endpoints Embracing Uncle Ho’s principle of striving for a "more completed" Vietnam, we must deepen our commitment to building trust and enhancing aspirations within every Vietnamese enterprise.
To achieve continuous improvement, we must consistently innovate our strategies for addressing familiar challenges, particularly in areas where we have already seen success This commitment to innovation is what brings us back to the factory, reinforcing our dedication to refining our processes.
This facility exemplifies innovation by effectively harnessing the principles of Industry 4.0, creating a powerful synergy between industry, agriculture, forestry, and exports, while integrating logistics services with aviation and maritime transport.
In every strategic breakthrough, the focus remains on advancements in systems, mechanisms, and policies These developments are driven not only by initiatives from the central level but also by local provinces, which play a crucial role in strategic planning and provide practical examples that inform central policies.
29 download by : skknchat@gmail.com